Despite a pledge by OPEC ministers to increase oil production, don't expect much of a break on oil prices. With crude oil prices hitting a record $56 a barrel Wednesday, OPEC ministers meeting in Iran have been grappling with a problem they haven’t confronted in the cartel’s 45-year history. In the past, OPEC tried to cool overheated prices by pumping more when supplies got too tight. But most OPEC producers say they’re already pumping as fast as they can. And despite the high cost of a barrel of crude, world demand shows no signs of slowing.
To help stop the surge in prices, OPEC ministers agreed to pump an extra half million barrels of oil a day beginning April 1. OPEC said it would consider pumping more later if the extra oil doesn't push prices lower.
But even before the decision was announced, some ministers had openly expressed doubts that the move will do any good, saying they’ve run out of options in trying to rein in the price of crude. Global oil demand has taken up most of the slack in extra OPEC capacity. Consumption is now believed by many analysts to be pressing up against the limits of what the world can produce. Saudi Arabia is the only country believed to have any surplus production left, and even then the Saudis are pumping close to 90 percent of capacity, according to the U.S. Department of Energy.
"There is not much we can do,” Algerian Oil Minister Chakib Khelil told reporters Tuesday in Isfahan, Iran, the site of Wednesday’s meeting.
"OPEC has done all it can do.” Qatar Oil Minister Abdullah al-Attiyah said. “This is out of the control of OPEC."
That's not to say OH MY GOD WE'RE OUT OF OIL WE'RE DOOMED. It's quite possible that they can ramp up production over the longer run, but I can't believe there'd be enough cartel discipline to keep members from pumping out everything that wasn't short run profitable.